Circle CEO Jeremy Allaire has suggested that Beijing should consider the possibility of permitting Chinese Yuan (CNY)-backed stablecoins as a means to internationalize its currency. In an interview with the South China Morning Post, Allaire expressed the view that stablecoins might offer a more effective path to facilitate the broader use of the RMB in global trade and commerce compared to central bank digital currencies (CBDCs).
Allaire emphasized that while he considers stablecoins to be a superior option, they are complementary to CBDCs. He acknowledged the importance of central banks upgrading their systems with modern distributed ledger technology but highlighted the distinct role of private sector innovation on the public internet.
Such a plan could face difficulties in China
However, implementing such a plan in China could face obstacles due to the country’s economic policies, including capital controls and restrictions on the free convertibility of the yuan. In order to contest the supremacy of the US dollar, Gita Gopinath, the First Deputy Managing Director of the International Monetary Fund (IMF), emphasized that China must adopt a more open approach towards its capital markets and embrace full currency convertibility.
Some experts and stakeholders believe that China is likely to maintain its current policies rather than pursue full currency convertibility and challenge the dollar’s supremacy. Brad Setser, a former senior advisor to the US trade representative during the Biden administration, suggested that China may gradually increase the use of the yuan to denominate trade with commodity-exporting countries but face challenges in radically altering its trade settlement structure.
It remains to be seen how Beijing will navigate the issue of stablecoins and CBDCs in relation to its broader economic and currency goals.
